German Renewable Energy Act surcharge: Amnesty for own consumption from power plant capacity

Eliminating legal uncertainty and taking the pressure off companies or final consumers who assumed, before the REA 2014 (EEG 2014) came into force on 1 August 2014, that they could supply themselves with power from their own share in the capacity of a power plant (“capacity share”) without paying the renewable energy surcharge – this is the purpose of a new transitional rule in the REA 2017 (EEG 2017), which is a type of amnesty provision.

Initial situation

The legislator defines the term capacity share in the explanatory memorandum as a “proportionally used generating capacity of a power-generation plant”. This is the case, for example, if a power plant company of a real power plant transfers a certain capacity of output to third parties (known as capacity lessees) for their use. The influence of the capacity lessee on power generation can vary greatly.

At least according to the current legal position, the power plant company is the supplier of the capacity lessees and must pay the supplier’s renewable energy surcharge under section 60(1) REA 2017 to the transmission system operator. Since this legal classification was not entirely clear before the REA 2014 came into force, power plant companies and capacity lessees receive a kind of amnesty for older cases, to protect them from claims by the transmission system operator which they had not expected before the REA 2014 came into force. This protection of acquired rights will even partly continue in the future.

Who can benefit from the arrangement?

With the amendment of the REA as of 1 January 2017, on certain conditions power plant companies can exempt the power supplied to their capacity lessees on the basis of capacity leases from the period before 1 August 2014 from the renewable energy surcharge or the earlier physical rollover of green energy for the past and future. This will be ensured by a newly introduced legal fiction in section 104(4) REA 2017. The capacity lessees will also indirectly benefit from this, as the power plant company normally has the chance to roll over the REA costs of supply to them.

Conditions for the amnesty for the period prior to 1 August 2014

For capacity lessees who held a capacity share in a power-generation plant for their own supply prior to 1 August 2014, the capacity share counts as a standalone power generation plant when determining the renewable energy surcharge.

If the power plant company can prove that the capacity lessee is to be classified as an operator in relation to this fictitiously standalone power-generation plant and the power plant company – assuming these fictitious facts – was not obliged towards the transmission system operator to physically take over green electricity (until 2009) or to pay the renewable energy surcharge (since 2010), it can refuse to satisfy existing claims by the transmission system operator.

However, power plant companies that supply capacity lessees can only benefit from this transitional arrangement if they submit the required notifications according to section 74(1) 1st sentence and section 74a(1) REA 2017 to the transmission system operator by 31 May 2017. These include in particular the basic details necessary to be able to see that the conditions of the amnesty have been met, and the energy quantities supplied.

Conditions for the amnesty for the period after 1 August 2014

The exemption from the surcharge can continue even after 1 August 2014 for electricity supplied by the power plant company from 1 August 2014 to capacity lessees. Essentially, the following additional conditions must be met:

• Both the right of the capacity lessee to use the capacity share and the self-supply concept of the capacity lessee continue unchanged;
• the power-generation plant has not been renewed, replaced or expanded; and
• no renewable energy surcharge would be payable under the rules protecting acquired rights for existing plants and older plants according to section 61c or 61d REA 2017 if the capacity lessee were the operator of the power-generation plant.

This protection of acquired rights is eliminated upon the sale of the capacity share. However, an exchange of individual capacity lessees for the remaining capacity lessees is of no consequence for the amnesty rule. For the protection of acquired rights for the period after 1 August 2014, a notification must also be made to the transmission system operator by 31 May 2017 at the latest. And in future, notifications under sections 74 and 74a REA 2017 are necessary in order to continue to use the privilege.

Pitfalls

In individual cases it must be proven that the capacity lease model meets the statutory minimum requirements. In other words, the capacity lease must refer to a real power plant and the capacity lessee must count according to general criteria as the operator of the fictitiously independent power-generation plant. This can only be determined on a case-by-case basis using the specific contractual agreements and the real circumstances and could be assessed differently by the transmission system operator in certain cases.

Moreover, the amnesty rule applies only if the electricity generated in the capacity share was consumed at the same time by the capacity lessee on a quarter-hour basis. The corresponding measurement data should still be available as evidence to be furnished to the transmission system operator.

Finally, the power plant company and the capacity lessee must work together, as the power plant company has to make the necessary notifications. To do so, the power plant company may need information from the capacity lessees. Also, the power plant company should have reinsurance, as an uncoordinated notification could breach contractual secondary obligations towards the capacity lessees. Finally, there may be disagreements between the power plant company and the capacity lessees about the use of the amnesty rule if not all capacity lessees can benefit from it.

Compliments of Noerr – a member of the EACCNY